A shipment of more than 50,000 sheep from Australia remained stranded at sea today after the government denied reports that it would be unloaded in Iraq.

"Reports that a deal has been done and that the Cormo Express will dock in Iraq ... to unload its cargo of live sheep are incorrect," agriculture minister Warren Truss said in a statement.

"The Australian government and industry continue to be involved in a number of sensitive negotiations with a number of countries and organisations in an endeavour to arrange a suitable destination for the sheep as soon as possible."

The plight of the animals, which have been on the ship for almost eight weeks, has sparked a storm of protest in Australia. Nearly 4,000 sheep on the vessel have already died.

The sheep had been bought by a Saudi importer, but Saudi officials rejected them, saying too many were infected with scabby mouth disease.

The United Arab Emirates and Pakistan have also rejected the sheep.

Animal rights activists denounce as inhumane Australia's live export trade -worth #83 million a year - because livestock is transported for weeks in ships that are often crowded and hot.

Most of Australia's shipments of live animals go to countries that require halal meat products.